Apple pays non-US income taxes of just 2 per cent

The company is likely awaiting a "repatriation tax holiday".

Apple's annual tax return (pdf), filed with the US Securities and Exchange Commission, reveals that it paid just 2 per cent tax on "foreign" (non-US) earnings in 2012.

The news, highlighted by the Sunday Times' Simon Duke, can be found on page 61 of the document, which reveals that the company owed $1,203m taxes on foreign pretax earnings of $36.8bn, and deferred payment on $490m in order to realise a tax bill of $713m this year. Even if the deferred taxes were paid in full, the company would still be paying an effective rate of just over 3 per cent.

International sales accounted for 61 per cent of Apple's business in the last year, and so many are likely to cry foul at the low proportion of taxes which it pays in the areas in which it carries out the majority of its business.

Apple, like many multinational corporations, employs many strategies to legally lower its tax bill. The company bases its entire Europe, Middle East and Africa division in Cork, Ireland, a low-tax jurisdiction, and also operates its worldwide sales and distribution network from there. In addition, the company is famous for the large amount of non-repatriated cash it sits on.

This is money which it has earned on foreign sales, and wishes to bring back to the US, but has not yet done so. Like many companies, Apple is hoping for a "repatriation tax holiday", where it can move that income back to the US without having to pay income tax on it. The most recent holiday was in 2004, and saw companies that brought back profits taxed at 5 per cent, instead of 35 per cent. Until Apple decides what to do with those cash holdings, the company is likely to continue deferring tax owed on them.

In addition, the company doesn't have to pay any tax on foreign earnings which are reinvested overseas – it has spent over $5bn this way in the 2012 tax year.

While the 2 per cent paid on international profits may harm Apple's reputation outside the US, the company still pays an effective tax rate of over 25 per cent overall, and provides a breakdown of the deductions that reduce this from the 35 per cent baseline corporation tax rate of the US.

Updated with credit to Sunday Times.

Apple's Headquarters in Cupertino, California. Photograph: Joe Ravi, CC-BY-SA 3.0

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why the Labour rebels have delayed their leadership challenge

MPs hope that Jeremy Corbyn may yet resign, while Owen Smith is competing with Angela Eagle to be the candidate.

The Eagle has hovered but not yet landed. Yesterday evening Angela Eagle's team briefed that she would launch her leadership challenge at 3pm today. A senior MP told me: "the overwhelming view of the PLP is that she is the one to unite Labour." But by this lunchtime it had become clear that Eagle wouldn't declare today.

The delay is partly due to the hope that Jeremy Corbyn may yet be persuaded to resign. Four members of his shadow cabinet - Clive Lewis, Rachel Maskell, Cat Smith and Andy McDonald - were said by sources to want the Labour leader to stand down. When they denied that this was the case, I was told: "Then they're lying to their colleagues". There is also increasing speculation that Corbyn has come close to departing. "JC was five minutes away from resigning yesterday," an insider said. "But Seumas [Milne] torpedoed the discussions he was having with Tom Watson." 

Some speak of a potential deal under which Corbyn would resign in return for a guarantee that an ally, such as John McDonnell or Lewis, would make the ballot. But others say there is not now, never has there ever been, any prospect of Corbyn departing. "The obligation he feels to his supporters is what sustains him," a senior ally told me. Corbyn's supporters, who are confident they can win a new leadership contest, were cheered by Eagle's delay. "The fact even Angela isn't sure she should be leader is telling, JC hasn't wavered once," a source said. But her supporters say she is merely waiting for him to "do the decent thing". 

Another reason for the postponement is a rival bid by Owen Smith. Like Eagle, the former shadow work and pensions secrtary is said to have collected the 51 MP/MEP nominations required to stand. Smith, who first revealed his leadership ambitions to me in an interview in January, is regarded by some as the stronger candidate. His supporters fear that Eagle's votes in favour of the Iraq war and Syria air strikes (which Smith opposed) would be fatal to her bid. 

On one point Labour MPs are agreed: there must be just one "unity candidate". But after today's delay, a challenger may not be agreed until Monday. In the meantime, the rebels' faint hope that Corbyn may depart endures. 

George Eaton is political editor of the New Statesman.